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The Effects of Monetary Policy on Output and Inflation in India: A Time-varying Approach

Author

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  • Abdhut Deheri

    (Pondicherry University)

Abstract

The study investigates whether the effects of monetary policy shocks on output and inflation have changed over time in India. By estimating a Time-varying Parameter Vector Autoregression model, we find substantial variations in the effects of monetary policy shock on both output and inflation. The impulse responses reveal that the effect of monetary policy shocks on inflation has weakened over time, while on output, it has strengthened. Our results also suggest that the adoption of the inflation-targeting framework has been beneficial in moderating inflation volatility.

Suggested Citation

  • Abdhut Deheri, 2021. "The Effects of Monetary Policy on Output and Inflation in India: A Time-varying Approach," Economics Bulletin, AccessEcon, vol. 41(3), pages 1603-1614.
    • Handle: RePEc:ebl:ecbull:eb-21-00060
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    References listed on IDEAS

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    More about this item

    Keywords

    Monetary policy; TVP-VAR; Impulse response; Markov chain Monte Carlo.;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General

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